The Lightning Network has been integrated into Cash App, a peer-to-peer payment service operated by Block, previously Square Inc.
The feature allows transactions between parties that aren’t connected to the blockchain network. It was created to address the scalability issues with the flagship cryptocurrency.
Bitcoin Lightning Important For Speedy Transactions
Block (previously Square), a fintech firm co-founded by former Twitter CEO Jack Dorsey, owns Cash App. The news of the BTC L2 integration was announced as a notification on the official Cash App app, which Crypto Twitter picked up:
With a throughput of five transactions per second (TPS) and an average transaction price of $1.79, Bitcoin falls far short of the mark in terms of payments.
$1.79 is a bargain compared to the highs of April 2021, when transactions cost an average of $62.78. Nonetheless, any transaction costing more than a few cents is impracticable as a widely accepted payment method.
With its layer-2 solution, the Lightning Network provides tremendous scalability and cheap transaction costs.
It operates by diverting transactions from the main chain and placing them into peer-to-peer “payment channels” between two parties, such as a buyer and a coffee shop. Once the channel is created, it can handle an endless number of transactions in real-time.
The payer must first lock Bitcoin into the network to open a payment channel. After the recipient has been locked, they can invoice amounts based on the cost of the items and services sold.
Fees are a mix of routing fees for sending payment information between Lightning Nodes and Bitcoin transaction fees for opening and closing channels. These, however, are still far less than direct main chain transactions.
In November 2021, the Lightning Network’s total USD value locked (TVL) peaked at $216 million. Since that time, the TVL has reduced.
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